Technical Talk: Place Your BetsOctober 20, 2011 @ 12:02 PM EST
Although we disagree with the idea that "the tape tells all," it is important for all traders to stay on top of key technical happenings on the charts. Below is our current "executive summary" take on the State of the Tape.
Technical Talk: October 20, 2011
Our Current Take:
After yet another "breakout fakeout," the indices find themselves back in their respective trading ranges. The bottom line here appears to be that traders are trying to decide if European leaders will be able to come up with a plan before the global economy suffers any additional damage. So, until we hear what the powers-that-be have to say, we will place our bets and watch the support levels.
We would consider being short-term buyers at: A close over 1225 on the S&P 500
We would consider being short-term sellers: A close below 1195 on the S&P 500
Trend and Momentum Indicators:
Short-Term Trend: We'll have to call the neutral at the present time. Although with decent support just below, it wouldn't take much to upgrade the trend rating.
Intermediate-Term Trend: No change today... The intermediate-term trend continues to improve (especially on a weekly chart basis) but until the S&P can move decisively above 1225, we'll call it neutral.
Market Internals: Our s.t. TBC model moved back to neutral overnight while our i.t. and l.t. models remain positive. However, with the market in an "all or nothing" mode lately, whereby all stocks tend to go the same direction, the breadth stats are easily influenced.
- TBC = Trend-and-Breadth-Confirm Model
Market Momentum: The momentum models remain moderately positive but there is still room for improvement. In other words, the Bulls really need to put some 'oomph' behind the next move if they have any hope at breaking out.
Support/Resistance Zones for S&P 500:
- Current Support: 1195
- Current Resistance: 1225
Early Warning Indicators:
Overbought/Oversold Condition: The S&P is remains quite overbought from short-term perspective and is now approaching overbought from an intermediate-term view.
Investor Sentiment: The sentiment indicators have been deteriorating over the past week and are now no better than neutral.
Below are snapshots of the two main charts we watch closely each day from a technical perspective. The indicators we display on the charts below include: 50 day weighted ma (purple), 18 day weithged ma (cyan), 10 day weighted ma offset by 2 days (orange), 4 day weighted ma offset 2 periods (dashed blue) and stochastic %K using 14 and %D.
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